On my last post we started to see some general classifications about who is the middle class in terms of income distribution, industry sophistication and professional occupation. Until here we have not conceptualized anything about who is who in this group, by using numbers. But we have to do it at some point, even though the income distribution classification (as it has been established by the experts) is not integrally well determined.

Remember that we have started a journey to peel the onion (to remove layers and layers of popular knowledge) of the Middle-Class definition, and by doing it, we will discover some great mistakes, and some excellent views. To demystify the current concepts of the term Middle-class will touch the preconceived notions of the “creme of the creme” experts about it. As Dora, la Exploradora, Eleonora is walking with you to explore what is going on with this term, and finally in a few weeks we will unfold our own Middle-Class definition. The particular one that will be coined by Eleonora Escalante Strategy integral strategic reflections for the new generations

Let´s begin today where we left our last publication.
The Middle-Class demographic profile for consultants also has its own definitions, because each consulting house or expert has its own point of view. Incredible! How difficult is to put one term in the same page in between different groups. Each to its own. That is why we always have to be somewhat cautious to discern, even the definitions, before starting our research/analyses. From the basics, a consultant or advisor is someone who gives expertise counsel or professional advice in a “specific field”. In the case of business/economics consulting, a consultant helps business owners to take into account and consider the different and best alternative options to make different type of decisions when it comes to solve problems and/or create economic growth for entities and companies. A strategic consultant goes deeper, we are essential to diagnose and plan ahead helping our clients to determine strategies and provide advice on how to execute as effectively as possible. Strategy in business is evolving from a “war or art of conquering resources concept” to a science. We are now evolving from Michael Porter competitive war concepts to a new cooperative/sustainable and integral concepts. And please keep in mind that the field of strategic management is so new, but so so so recent, we just started to see this area as a science after the Second World War.

Repeating again, corporate strategy consultants as Eleonora Escalante Strategy hold an expertise of a “philosophic magnitude”. We help business owners, governments, NGOs and international cooperation agencies to define “what to do”, we are shaping an iterative process, sometimes by trial and error, helping to define, to conceptualize, to create. In my personal consulting house, we do it beyond the rules of profitable growth. We are always hanging out with the question What is the endeavor (enterprise) definition of our clients? And our core mission is to help them to define and strengthen it, to determine the best growth opportunities “integrally”, not just based on revenues or net profits, ROE, share price, dividend re-investments success, cost of capital increase, value creation per employee, etc.

Given the latter explanation, consultants are experts in research. And strategic researchers abound not only in consulting agencies, but also in banks, financial entities, think tanks, academic organizations, etc. Consultants are basically researchers, that is why when we don´t work for consulting agencies, we can work in universities which treasure and support research, or we can work as authors (writing books of our research domains), we can also work as practitioners of research in banks, as think-tank researchers, or with serious journalism offices/magazines too. With experience and time (once we have around 25 to 30 years of experience) we can build our own business intelligence or strategic research houses, and once we enter into our 60s we began being called as External advisors to Board of Directors. Anyway, let’s continue with the way in which consultants have defined the term middle-class.

Sadly, consultants have gone heavy-duty into “numeric analysis”. We have to change this for the new generations. When stratifying the societies, we can’t continue always defining everything around the variable income distribution. The majority of us stick to statistics from the national census that are gathered by the United Nations or World Bank. And if these entities stick to “income distribution”; then we also stick to “income distribution”. And so forth that also applies to the Middle-Class definition. However as I mentioned to you, it is not sustainable neither integral to conceptualize our Middle-Class based on this variable “only”, but that is what we have and what we can get. Particularly after this pandemic the definition of the Middle-Class has to change. If you stay reading this saga for the next three months, you will also comprehend why.

Population of the Middle Class, can´t be quantified if the concept is blurry. Just an example, in the United States, the society has been classified by consulting researchers mainly in seven ascending levels, exposed from down-up: (1) lower lowers, (2) upper lowers, (3) working class, (4) middle class, (5) upper middles, (6) lower uppers, and (7) upper uppers. For many consultants, the Middle-Class, they includes only the groups (3), (4) and (5), meanwhile for others they also include the group (2), the working class. During the last 50 years, the increasing global integration among cities is also blurring these traditional boundaries separating social classes by economic development levels. All these tags used by Marketers that come from “income distribution and consumption patterns”, deserve to be reviewed. Also when we read that the Middle-Class is defined in terms of a range of income calculated using three variables (country, number of members per household, salary per year), that is extremely risky and not accurate.

The attributes that help us to define the Middle-Class can not be only be based by income distribution, because the Middle Class has other attributions. The differential key factor about the middle class is education. For example, you can be a pure “Upper-Middle Class” given your education level, but not have the revenues per year that you deserve.

The demographic factor of the Middle-Class education. When it comes to Educational groups, and regardless of the recent digital trend, the population of any society on earth (no matter the income distribution) falls into 5 educational groups:

Around 1 billion people (adults) in the world to this day are still illiterate. Around 66% of the world adults population have mainly studied only at some level in the primary education range (from 1st to 6th grade), and these are still found in the following countries: India, China, Bangladesh, Pakistan, Nigeria, Ethiopia, Indonesia and Egypt. If you add the global total adult illiterates and the total adults in the world which hold primary basic education only ( from 1st to 6th grade), what a discovery: 2/3 of those adults are women. Pity eh!

Of course, the educational groups vary per country. In the United States, there is no coincidence that it is the country with the most ample and wide middle class on earth which consumes everything they can. The US is the country which has the world´s highest percentages of college-educated citizens, do you mind to realize this? Is the abundance of the educated middle-class, the cause of prosperity and wealth in a nation? Keep this paragraph introduction about education demographics for the 9th topic on the row outline below.

Can we define Middle-Class by household patterns? We can´t consider household patterns as a certain demographic profile either. The global middle-class citizens limit the amount of kids per family. But that is relative and varies from country to country. For example in the US, the pattern is that only one in five households has the structure of a married couple with children under 18. More than 30% of households in the US are single-live-alone, or are single-parent families (around 9%), childless married couples and empty nesters hold around 30% of the households, and the rest are other family structures. The current US CENSUS (which Trump Administration has been doing recently) will provide a better overview of this situation. In addition, the Middle-Class has such a diverse household practice when it comes to distinctive needs and buying habits. Regardless if single, separated, widowed, divorced, the trend in populated cities has been to to keep a lifestyle into “smallish” apartments, appliances, furniture and food packages, because to live in the city is always between 30% to twice expensive than to live in rural areas. But this also has to change. Rural areas need people and are desperate to attract the youngsters. Instead of going “smallish”, what if an attribute of the Middle-Class could be going “greatish”?.

The definition of the Global Middle Class in pppd. The OECD, Brookings Institution, World Bank, Ernst & Young, and banks such as Bank of America had arrived to this definition, in terms of income distribution:
“The Middle class comprise the households with per capita income between US$11 to US$110 dollars per person per day (pppd). This implies an annual income for a four-person middle-class household of US$14,600 to US$146,000”.

According to these experts, they have calculated that by 2017, there were around 3.2 billion people in the Middle-Class, which for me is impossible to believe, because we can´t consider the US$11 pppd as a good lower limit globally. This lower limit is not correct. In El Salvador, the ETHICAL threshold for a lower-middle class should be at least US$80 pppd per household of 5 members (for gross monthly salary of US $2,400 per this household).

I would like to close this post today, by inviting you to visit the following Business Global Income Calculator from the Washington Post (that reflects the latter definition), and find out by your own if you belong to the Global-Middle Class?

https://www.washingtonpost.com/graphics/2018/business/global-income-calculator/

Next week we will continue with the Ethical Values of the Middle Class. See you then. Have a beautiful weekend.

Source of reference utilized this week:
https://www.brookings.edu/blog/future-development/2018/09/27/a-global-tipping-point-half-the-world-is-now-middle-class-or-wealthier/
https://www.pewresearch.org/global/2015/07/08/mapping-the-global-population-how-many-live-on-how-much-and-where/
https://www.worldbank.org/content/dam/Worldbank/document/MIC-Forum-Rise-of-the-Middle-Class-SM13.pdf
https://www.washingtonpost.com/graphics/2018/business/global-income-calculator/
https://usa.visa.com/dam/VCOM/global/partner-with-us/documents/middle-class-spending-whitepaper.pdf
https://www.caixabankresearch.com/en/economics-markets/labour-market-demographics/emergence-middle-class-emerging-country-phenomenon
https://www.pewsocialtrends.org/2012/08/22/chapter-2-middle-class-demographics/
https://carnegieendowment.org/files/middle_class-edited.pdf
https://www.researchgate.net/publication/46457345_The_Emerging_Middle_Class_in_Developing_Countries
Disclaimer: Illustrations in Watercolor are painted by Eleonora Escalante. Other types of illustrations or videos (which are not mine) are used for educational purposes ONLY.  Nevertheless, the majority of the pictures, images, or videos shown on this blog are not mine.  I do not own any of the lovely photos or images posted unless otherwise stated.

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Corporate Strategy Artist, San Salvador, El Salvador View all posts by eleonoraescalantestrategy